Longer-term yields higher in volatile session after jobs report

Longer-term US Treasury yields were higher in choppy trading on Friday after a report showing employment growth rebounded less than forecast in January, strengthening expectations of more stimulus spending in Washington.

The benchmark 10-year yield was up 1.4 basis points at 1.1532% in morning trading after it reached as high as 1.188%, its highest since March 20, 2020.

In addition a closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 104 basis points, about 2 basis points higher than Thursday's close and its highest since May 2017.

US employment growth rebounded less than expected in January and job losses the prior month were deeper than initially thought, strengthening the argument for additional relief money from the government to aid the recovery from the COVID-19 pandemic.

Analysts described the results as having mixed implications for government bond markets and giving traders a chance to take profits after yields on longer-term US notes rose in recent days.

"The jobs report isn't bad. You should expect a lot of volatility at a time like this," said Subadra Rajappa, head of US Rates Strategy for Societe Generale in New York. The unemployment rate was at 6.3% in January, which Rajappa said put it close to achieving the 5% targeted by the US Federal Reserve.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was down less than a basis point at 0.1112% in morning trading.